How does the competitive landscape differ between the Growth and Maturity stages?

In the Growth stage, new competitors enter the market to capture a share of the expanding demand. In the Maturity stage, the market is saturated, leading to intense competition and price wars as firms fight for a larger slice of a fixed market size.

What is the difference between 'skimming' and 'penetration' pricing in the Introduction stage?

Skimming involves setting a high initial price to recover R&D costs from less price-sensitive early adopters. Penetration pricing sets a low price to quickly gain high market share and discourage competitors from entering.

Compare the promotional focus of the Introduction stage versus the Maturity stage.

Introduction promotion is 'informative,' focusing on teaching consumers what the product is and why they need it. Maturity promotion is 'persuasive' and 'reminder-based,' focusing on brand differentiation and maintaining customer loyalty.

What is the 'self-fulfilling prophecy' error in Product Life Cycle management?

This occurs when managers misinterpret a temporary sales dip as the start of the Decline stage. By cutting marketing budgets in response, they actually cause the decline they were trying to manage.

Why is it a mistake to assume all products follow the standard S-shaped PLC curve?

Different product categories have different shapes; for example, 'fads' have a rapid rise and immediate fall, while 'staples' may stay in the Maturity stage for decades without ever entering a significant Decline.

What error is made when a firm ignores the 'Profit Peak' and only watches 'Sales Volume'?

Firms may over-invest in sales growth during late Maturity, failing to realize that the marginal cost of acquiring new customers is exceeding the marginal profit, leading to overall financial decline despite high sales.

Define 'Extension Strategies' in the context of the PLC.

Extension strategies are marketing techniques used to prolong the Maturity stage of a product and delay its entry into the Decline stage, such as finding new markets or updating product features.

What does 'Market Saturation' mean?

Market saturation occurs during the Maturity stage when most potential customers already own the product or have chosen a preferred brand, leaving little room for new customer acquisition.

What is 'Product Harvesting'?

Harvesting is a strategy used in the Decline stage where a company reduces all marketing and development expenses to a minimum to squeeze out the remaining profit before the product is discontinued.

Why do profits often remain negative during the Introduction stage?

Profits are negative because the low initial sales volume is insufficient to cover the massive fixed costs of research and development, as well as the high variable costs of heavy promotional launches.

Product: The Product Life Cycle | OCR GCSE Business

Product: The Product Life Cycle

Summary

The Product Life Cycle (PLC) is a strategic framework that describes the stages a product passes through from its initial launch to its eventual removal from the market. It serves as a diagnostic tool for marketers to adjust their marketing mix—Product, Price, Place, and Promotion—based on the changing competitive landscape and consumer behavior at each stage.

1. Definition & Core Concepts

The Product Life Cycle (PLC): A conceptual model representing the sales history of a product over time, typically divided into four distinct stages: Introduction, Growth, Maturity, and Decline.
Introduction Stage: This phase begins when a new product is first launched. Sales growth is usually slow as the market is being established, and profits are often negative due to high research, development, and promotional costs.
Growth Stage: Characterized by rapid market acceptance and increasing profits. During this stage, competitors often enter the market, and the focus shifts to building brand preference and market share.
Maturity Stage: Sales growth slows down as the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.
Decline Stage: The period when sales fall off and profits erode. This can be caused by technological advances, shifts in consumer tastes, or increased domestic and foreign competition.

A graph showing the Sales (solid red line) and Profit (dashed green line) curves across the four stages of the Product Life Cycle. Note that profit peaks before sales.

2. Underlying Principles

Diffusion of Innovation: The PLC is driven by how different consumer segments adopt a product. Innovators and early adopters drive the Introduction and early Growth stages, while the majority and laggards enter during Maturity and Decline.
Profit Dynamics: Profits typically peak before sales do. This occurs because, during the late Growth and early Maturity stages, the costs of defending market share through heavy promotion and price competition begin to outweigh the revenue gains from incremental sales.
Economies of Scale: As a product moves into the Growth stage, production volumes increase, allowing the firm to reduce unit costs. This efficiency is a primary driver of the profit surge seen during the transition from Introduction to Growth.

3. Methods & Techniques: Extension Strategies

4. Key Distinctions

5. Exam Strategy & Tips

6. Common Pitfalls & Misconceptions